NPR had a piece on Morning Edition discussing the problems of the first round of the TARP. The piece concealed the fact that many, if not most, of the major banks are effectively bankrupt. This fact would have answered riddles like their reluctance to make new loans. Given the large volume of bad loans that they will have to write down in the months ahead, it is not surprising that the banks would be hesitant to make new loans. In a discussion of policies being proposed, WSJ economics reporter David Wessel told listeners that some people want to take over the banks and run them like the Agriculture department. Actually, the motive for taking over the banks is that they are bankrupt. The better analogy would have been to say that people want the government to take over the banks and run them like IndyMac. [The NYT is no better].
--Dean Baker
